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Press release from Business Wire

Analog Devices Reports Fourth Quarter and Fiscal Year 2012 Results

Tuesday, November 27, 2012

Analog Devices Reports Fourth Quarter and Fiscal Year 2012 Results16:00 EST Tuesday, November 27, 2012 NORWOOD, Mass. (Business Wire) -- Analog Devices, Inc. (NASDAQ: ADI), a global leader in high-performance semiconductors for signal processing applications, today announced financial results for its fiscal fourth quarter and fiscal year ended November 3, 2012. “ADI delivered solid results for the fourth quarter, with revenue increasing by 2% and diluted EPS increasing by 4% compared to the prior quarter,” said Jerald G. Fishman, CEO. “For the year, revenue decreased 9.8% to about $2.7 billion, reflecting difficult economic conditions and prevailing global uncertainty. We nevertheless generated 65% gross margins, 31% operating margins and over $800 million, or 30% of revenue, in cash from operations for the year.” Mr. Fishman continued, “Overall orders decreased during the quarter as customers became more cautious and continued to reduce inventories, in many cases to historically low levels. As a result, we began reducing our production levels in the fourth quarter and will reduce them further in the first quarter of fiscal 2013 to keep our inventory at appropriate levels. While this will reduce gross margins in the short term, we believe this should provide significant operating leverage when growth resumes.” ADI also announced that the Board of Directors has declared a cash dividend of $0.30 per outstanding share of common stock. The dividend will be paid on December 18, 2012 to all shareholders of record at the close of business on December 7, 2012. Results for the Fourth Quarter of Fiscal 2012 Revenue totaled $695 million Gross margin was 63.8% of revenue Operating margin was 31% of revenue Diluted EPS was $0.58 Cash flow from operations was $236 million, or 34% of revenue Results for Fiscal Year 2012 Revenue totaled $2.7 billion Gross margin was 64.5% of revenue Operating margin was 30.5% of revenue Diluted EPS was $2.13 Cash flow from operations was $815 million, or 30% of revenue Repurchases of common stock and dividend payments to shareholders totaled $505 million Please refer to the schedules provided for a summary of revenue and earnings, selected balance sheet information, and the cash flow statement for the fourth quarter and fiscal year ended 2012, as well as the immediately prior and year-ago quarters. Additional information on revenue by end market and revenue by product type is provided on Schedules D and E. A more complete table covering prior periods is available at investor.analog.com. Outlook for the First Quarter of Fiscal 2013The following statements are based on current expectations. These statements are forward- looking and actual results may differ materially, as a result of, among other things, the important factors discussed at the end of this release. These statements supersede all prior statements regarding our business outlook set forth in prior ADI news releases, and ADI disclaims any obligation to update these forward-looking statements. Revenue estimated to decrease in the range of -6% to -12% Gross margin estimated to be approximately 62% Operating expenses estimated to be approximately $223 million Tax rate estimated to be approximately 18% Diluted EPS estimated at $0.40 to $0.48 Conference Call Scheduled for 5:00 pm ET ADI will host a conference call to discuss the fourth quarter results and short-term outlook today, beginning at 5:00 pm ET. Investors may join via webcast, accessible at investor.analog.com, or by telephone (call 706-634-7193 ten minutes before the call begins and provide the password "ADI.") A replay will be available almost immediately after the call. The replay may be accessed for up to two weeks by dialing 855-859-2056 (replay only) and providing the conference ID:68650785, or by visiting investor.analog.com. Non-GAAP Financial Information This release includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Schedule F of this press release provides the reconciliation of the Company's non-GAAP measures to its GAAP measures.Manner in Which Management Uses the Non-GAAP Financial Measures Management uses non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, and non-GAAP diluted earnings per share to evaluate the Company's operating performance from continuing operations against past periods and to budget and allocate resources in future periods. These non-GAAP measures also assist management in understanding and evaluating the Company's operating results and trends in the Company's business. Economic Substance Behind Management's Decision to Use Non-GAAP Financial Measures The items excluded from the non-GAAP measures were excluded because they are of a non-recurring or non-cash nature. The following item is excluded from our non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, and non-GAAP diluted earnings per share:Restructuring-Related Expenses. These expenses are incurred in connection with facility closures, consolidation of manufacturing facilities, and other cost reduction efforts. Apart from ongoing expense savings as a result of such items, these expenses and the related tax effects have no direct correlation to the operation of our business in the future. The following item is excluded from our non-GAAP diluted earnings per share:Tax-Related Items. In the first quarter of fiscal year 2011, the Company recorded a $13 million tax benefit related to taxes that are one-time in nature. These one-time tax items included the reinstatement of the R&D tax credit in December 2010, retroactive to January 1, 2010; a reduction in a state tax credit valuation reserve we had recorded in prior years; and a benefit from the increase to the Irish deferred tax asset as a result of the increase in the Irish manufacturing tax rate from 10% to 12.5%. In the second quarter of fiscal 2011, the Company recorded a one-time $10.8 million tax benefit for a settlement with the Internal Revenue Service related to certain tax matters for the fiscal 2004 through fiscal 2007 tax years. We excluded these tax-related items from our non-GAAP measures because they are not associated with the tax expense on our current operating results. In the third quarter of fiscal 2012, the Company recorded a one-time $3.4 million tax benefit related to the release of a tax reserve for an expired tax year. We excluded this tax-related item from our non-GAAP measures because it is not associated with the tax expense on our current operating results. Why Management Believes the Non-GAAP Financial Measures Provide Useful Information to Investors Management believes that the presentation of non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, and non-GAAP diluted EPS is useful to investors because it provides investors with the operating results that management uses to manage the Company. Material Limitations Associated with Use of the Non-GAAP Financial Measures Analog Devices believes that non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, and non-GAAP diluted EPS have material limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. In addition, our non-GAAP measures may not be comparable to the non-GAAP measures reported by other companies. The Company's use of non-GAAP measures, and the underlying methodology when excluding certain items, is not necessarily an indication of the results of operations that may be expected in the future, or that the Company will not, in fact, record such items in future periods. Management's Compensation for Limitations of Non-GAAP Financial Measures Management compensates for these material limitations in non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margins, and non-GAAP diluted EPS by also evaluating our GAAP results and the reconciliations of our non-GAAP measures to the most directly comparable GAAP measures. Investors should consider our non-GAAP financial measures in conjunction with the corresponding GAAP measures. About Analog Devices Innovation, performance, and excellence are the cultural pillars on which Analog Devices has built one of the longest standing, highest growth companies within the technology sector. Acknowledged industry-wide as the world leader in data conversion and signal conditioning technology, Analog Devices serves over 60,000 customers, representing virtually all types of electronic equipment. Analog Devices is headquartered in Norwood, Massachusetts, with design and manufacturing facilities throughout the world. Analog Devices' common stock is included in the S&P 500 Index. This release may be deemed to contain forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, our statements regarding expected revenue,earnings per share, operating expenses, gross margin, tax rate, and other financial results, expected production and inventory levels, expected market trends, and expected customer demand and order rates for our products,that are based on our current expectations, beliefs, assumptions, estimates, forecasts, and projections about our business and the industry and markets in which Analog Devices operates. The statements contained in this release are not guarantees of future performance, are inherently uncertain, involve certain risks, uncertainties, and assumptions that are difficult to predict, and do not give effect to the potential impact of any mergers, acquisitions, divestitures, or business combinations that may be announced or closed after the date hereof. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements, and such statements should not be relied upon as representing Analog Devices' expectations or beliefs as of any date subsequent to the date of this press release. We do not undertake any obligation to update forward-looking statements made by us. Important factors that may affect future operating results include: sovereign debt issues globally, any faltering in global economic conditions or the stability of credit and financial markets, erosion of consumer confidence and declines in customer spending, unavailability of raw materials, services, supplies or manufacturing capacity, changes in geographic, product or customer mix, adverse results in litigation matters, and other risk factors described in our most recent filings with the Securities and Exchange Commission.Our results of operations for the periods presented in this release are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to Analog Devices, which is subject to change. Although any such projections and the factors influencing them will likely change, we will not necessarily update the information, as we will only provide guidance at certain points during the year. Such information speaks only as of the original issuance date of this release. Analog Devices and the Analog Devices logo are registered trademarks or trademarks of Analog Devices, Inc. All other trademarks mentioned in this document are the property of their respective owners. Analog Devices, Fourth Quarter, Fiscal 2012                       Schedule ARevenue and Earnings Summary (GAAP)(In thousands, except per-share amounts)                         Three Months EndedTwelve Months Ended4Q 123Q 124Q 11FY 12FY 11         Nov. 3,2012     Aug. 4,2012     Oct. 29,2011Nov. 3,2012     Oct. 29,2011 Revenue $ 694,964 $ 683,026 $ 716,134 $ 2,701,142 $ 2,993,320 Year-to-year change -3 % -10 % -7 % -10 % 8 % Quarter-to-quarter change 2 % 1 % -6 % Cost of sales (1)         251,682         235,152         255,620     960,141         1,006,779   Gross margin 443,282 447,874 460,514 1,741,001 1,986,541 Gross margin percentage 63.8 % 65.6 % 64.3 % 64.5 % 66.4 % Year-to-year change (basis points) -50 -160 -270 -190 120 Quarter-to-quarter change(basis points)         -180         40         -290           Operating expenses: R&D (1) 130,394 129,694 123,889 512,003 505,570 Selling, marketing and G&A (1) 97,609 99,873 99,094 396,519 406,707 Special charges         -         5,836         2,239     8,431         2,239   Total operating expenses 228,003 235,403 225,222 916,953 914,516 Total operating expenses percentage 32.8 % 34.5 % 31.4 % 33.9 % 30.6 % Year-to-year change (basis points) 140 400 150 330 -200 Quarter-to-quarter change (basis points)         -170         80         90           Operating income 215,279 212,471 235,292 824,048 1,072,025 Operating income percentage 31.0 % 31.1 % 32.9 % 30.5 % 35.8 % Year-to-year change (basis points) -190 -570 -420 -530 320 Quarter-to-quarter change (basis points)         -10         -40         -390           Other expense         2,755         3,002         4,292     10,515         10,578   Income before income tax 212,524 209,469 231,000 813,533 1,061,447 Provision for income taxes 33,337 39,701 47,473 162,297 200,553 Tax rate percentage         15.7 %       19.0 %       20.6 %   19.9 %       18.9 % Income from continuing operations, net of tax         179,187         169,768         183,527     651,236         860,894   Income from discontinued operations, net of tax         -         -         -     -         6,500   Net income       $ 179,187       $ 169,768       $ 183,527   $ 651,236       $ 867,394     Shares used for EPS - basic 300,679 298,445 298,910 298,761 299,417 Shares used for EPS - diluted 307,954 305,359 305,734 306,191 308,236   Earnings per share from continuing operations - basic $ 0.60 $ 0.57 $ 0.61 $ 2.18 $ 2.88 Earnings per share from continuing operations- diluted $ 0.58 $ 0.56 $ 0.60 $ 2.13 $ 2.79     Earnings per share - basic $ 0.60 $ 0.57 $ 0.61 $ 2.18 $ 2.90 Earnings per share - diluted $ 0.58 $ 0.56 $ 0.60 $ 2.13 $ 2.81   Dividends paid per share       $ 0.30       $ 0.30       $ 0.25   $ 1.15       $ 0.94     (1) Includes stock-based compensation expense as follows: Cost of sales $ 1,905 $ 1,871 $ 1,835 $ 7,254 $ 7,294 R&D $ 6,124 $ 5,999 $ 6,033 $ 23,169 $ 23,289 Selling, marketing and G&A $ 6,248 $ 5,921 $ 5,684 $ 23,077 $ 21,775     Analog Devices, Fourth Quarter, Fiscal 2012             Schedule BSelected Balance Sheet Information (GAAP)(In thousands)   4Q 123Q 124Q 11       Nov. 3,2012     Aug. 4,2012     Oct. 29,2011 Cash & short-term investments $ 3,900,378 $ 3,765,045 $ 3,592,462 Accounts receivable, net 339,881 345,795 348,416 Inventories (1) 313,723 312,079 295,081 Other current assets       142,203       138,366       150,389 Total current assets 4,696,185 4,561,285 4,386,348 PP&E, net 500,867 490,581 478,839 Investments 30,242 29,615 29,361 Goodwill and intangible assets 312,605 308,190 287,287 Other       80,448       66,951       95,800 Total assets     $ 5,620,347     $ 5,456,622     $ 5,277,635   Deferred income on shipments to distributors, net $ 238,541 $ 246,674 $ 233,249 Other current liabilities 286,538 261,868 291,756 Long-term debt, non-current 807,098 842,540 871,876 Non-current liabilities 122,811 76,934 85,341 Shareholders' equity       4,165,359       4,028,606       3,795,413 Total liabilities & equity     $ 5,620,347     $ 5,456,622     $ 5,277,635   (1) Includes $2,517, $2,361 and $2,431 related to stock-based compensation in4Q12, 3Q12 and 4Q11, respectively.     Analog Devices, Fourth Quarter, Fiscal 2012                     Schedule CCash Flow Statement (GAAP)(In thousands)                         Three Months EndedTwelve Months Ended4Q 123Q 124Q 11FY 12FY 11Nov. 3,2012     Aug. 4,2012     Oct. 29,2011Nov. 3,2012     Oct. 29,2011 Cash flows from operating activities: Net Income $ 179,187 $ 169,768 $ 183,527 $ 651,236 $ 867,394 Adjustments to reconcile net incometo net cash provided by operations: Depreciation 27,484 27,107 28,781 109,705 116,873 Amortization of intangibles 54 56 267 128 1,346 Stock-based compensation expense 14,277 13,791 13,552 53,500 52,358 Gain on sale of business - - - - (6,500 ) Gain on sale of investments - - - (1,231 ) - Excess tax benefit - stock options (2,678 ) (5,054 ) (7,640 ) (12,230 ) (44,936 ) Noncash portion of special charges - 219 - 219 - Other non-cash activity (1,417 ) (1,380 ) (352 ) (3,187 ) 833 Deferred income taxes (5,696 ) 34 8,693 (9,801 ) 1,704 Changes in operating assets and liabilities       24,836         (66,835 )       3,332     26,203         (88,543 ) Total adjustments       56,860         (32,062 )       46,633     163,306         33,135   Net cash provided by operating activities       236,047         137,706         230,160     814,542         900,529   Percent of total revenue       34.0 %       20.2 %       32.1 %   30.2 %       30.1 %   Cash flows from investing activities: Additions to property, plant and equipment, net (37,511 ) (39,239 ) (26,331 ) (132,176 ) (122,996 ) Net proceeds related to sale of businesses - - - - 10,000 Proceeds related to sale of investments - - - 1,506 - Payments for acquisitions, net of cash acquired - - - (24,158 ) (13,988 ) Purchases of short-term available-for-sale investments (1,882,319 ) (1,854,249 ) (1,156,671 ) (8,165,043 ) (4,289,304 ) Maturities of short-term available-for-sale investments 1,713,973 1,534,235 1,101,973 6,543,795 3,436,284 Sales of short-term available-for-sale investments 99,843 76,330 23,476 437,748 282,861 (Increase) Decrease in other assets       (447 )       408         88     (1,362 )       (6,595 ) Net cash used for investing activities       (106,461 )       (282,515 )       (57,465 )   (1,339,690 )       (703,738 )   Cash flows from financing activities: Proceeds from long-term debt - - - - 515,507 Term loan repayments (33,625 ) (3,625 ) (3,625 ) (56,500 ) (28,392 ) Early termination of swap agreements - - - 18,520 - Dividend payments to shareholders (91,372 ) (89,511 ) (74,824 ) (344,701 ) (281,626 ) Repurchase of common stock (20,795 ) (17,344 ) (82,816 ) (160,536 ) (330,256 ) Net proceeds from employee stock plans 80,492 23,329 27,925 191,220 217,164 Contingent Consideration Payment - - - (1,991 ) - (Decrease) increase in other financing activities (1,125 ) (4,755 ) 914 (7,869 ) 1,279 Excess tax benefit - stock options       2,678         5,054         7,640     12,230         44,936   Net cash (used for) provided by financing activities       (63,747 )       (86,852 )       (124,786 )   (349,627 )       138,612   Effect of exchange rate changes on cash       845         (1,256 )       (630 )   (1,492 )       (303 )   Net increase (decrease) in cash and cash equivalents 66,684 (232,917 ) 47,279 (876,267 ) 335,100 Cash and cash equivalents at beginning of period       462,149         695,066         1,357,821     1,405,100         1,070,000   Cash and cash equivalents at end of period     $ 528,833       $ 462,149       $ 1,405,100   $ 528,833       $ 1,405,100       Analog Devices, Fourth Quarter, Fiscal 2012                         Schedule DRevenue Trends by End Market The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the "ship to" customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data evolve and improve, the categorization of products by end market can vary over time. When this occurs we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.                                 Three Months EndedNov. 3, 2012Aug. 4,2012Oct. 29,2011Revenue     %       Q/Q %     Y/Y %RevenueRevenue Industrial $ 304,693 44 % -5 % -3 % $ 322,092 $ 315,716 Automotive 110,227 16 % -4 % -3 % 114,730 113,528 Consumer 137,620 20 % 28 % -6 % 107,848 146,221 Communications   142,424     20 % 3 % 1 %   138,356   140,669 Total Revenue$694,964     100%2%-3%$683,026$716,134                                   Twelve Months EndedNov. 3, 2012Oct. 29,2011Revenue     %       Y/Y %Revenue Industrial $ 1,240,344 46 % -12 % $ 1,411,386 Automotive 463,577 17 % 11 % 417,929 Consumer 467,626 17 % -16 % 559,142 Communications   529,595     20 % -12 %   604,863 Total Revenue$2,701,142     100%-10%$2,993,320     Analog Devices, Fourth Quarter, Fiscal 2012                         Schedule ERevenue Trends by Product Type The categorization of our products into broad categories is based on the characteristics of the individual products, the specification of the products and in some cases the specific uses that certain products have within applications. The categorization of products into categories is therefore subject to judgment in some cases and can vary over time. In instances where products move between product categories we reclassify the amounts in the product categories for all prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each product category.                                 Three Months EndedNov. 3, 2012Aug. 4,2012Oct. 29,2011Revenue     %       Q/Q %     Y/Y %RevenueRevenue Converters $ 307,252 44 % 3 % -5 % $ 299,634 $ 323,291 Amplifiers / Radio Frequency 174,521 25 % -4 % -4 % 180,899 182,708 Other analog   112,083     16 % 14 % 11 %   98,269   101,176 Subtotal Analog Signal Processing   593,856     85 % 3 % -2 %   578,802   607,175 Power management & reference   45,808     7 % 1 % -14 %   45,401   53,173 Total Analog Products$639,664     92%2%-3%$624,203$660,348 Digital Signal Processing   55,300     8 % -6 % -1 %   58,823   55,786 Total Revenue$694,964     100%2%-3%$683,026$716,134                                   Twelve Months EndedNov. 3, 2012Oct. 29,2011Revenue     %*     Y/Y %Revenue Converters $ 1,192,064 44 % -11 % $ 1,343,487 Amplifiers / Radio Frequency 697,687 26 % -11 % 788,299 Other analog   397,376     15 % -3 %   410,323 Subtotal Analog Signal Processing   2,287,127     85 % -10 %   2,542,109 Power management & reference $ 182,134     7 % -16 % $ 217,615 Total Analog Products   2,469,261     91%-11%   2,759,724 Digital Signal Processing   231,881     9 % -1 %   233,596 Total Revenue$2,701,142     100%-10%$2,993,320   * The sum of the individual percentages does not equal the total due to rounding Analog Devices, Fourth Quarter, Fiscal 2012                     Schedule FReconciliation from Non-GAAP to GAAP Data (In thousands, except per-share amounts)   See "Non-GAAP Financial Information" in this press release for a description of the items excluded from our non-GAAP measures.                       Three Months EndedTwelve Months Ended4Q 123Q 124Q 11FY 12FY 11Nov. 3,2012Aug. 4,2012Oct. 29,2011Nov. 3,2012     Oct. 29,2011   GAAP Operating Expenses$228,003$235,403$225,222$916,953$914,516Percent of Revenue32.8%34.5%31.4%33.9%30.6% Restructuring-Related Expense         (5,836 )       -     (5,836 )       -   Non-GAAP Operating Expenses$228,003       $229,567       $225,222   $911,117       $914,516   Percent of Revenue32.8%33.6%31.4%33.7%30.6%   GAAP Operating Income/Margin From Continuing Operations$215,279$212,471$235,292$824,048$1,072,025Percent of Revenue31.0%31.1%32.9%30.5%35.8% Restructuring-Related Expense   -         5,836         -     5,836         -   Non-GAAP Operating Income/Margin From Continuing Operations$215,279       $218,307       $235,292   $829,884       $1,072,025   Percent of Revenue31.0%32.0%32.9%30.7%35.8%   GAAP Diluted EPS Including Discontinued Operations$0.58$0.56$0.60$2.13$2.81 Diluted Loss Per Share from Discontinued Operations - - - - 0.02 GAAP Diluted EPS From Continuing Operations$0.58$0.56$0.60$2.13$2.79 IRS Tax Settlement - - - - (0.04 ) Impact of the Reinstatement of the R&D Tax Credit - - - - (0.02 ) Impact of State Tax Valuation - - - - (0.02 ) Impact of Increase in Irish Tax Rate - - - - (0.00 ) Restructuring-Related Expense - 0.01 - 0.01 - Impact of Expired Tax Statute   -         (0.01 )       -     (0.01 )       -   Non-GAAP Diluted EPS From Continuing Operations (1)$0.58       $0.56       $0.60   $2.13       $2.72     (1) The sum of the individual per share amounts may not equal the total due to rounding. Analog Devices, Inc.Mr. Ali Husain, 781-461-3282781-461-3491 (fax)investor.relations@analog.com